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Also on the issue of cost, I argue that to give a person the opportunity to buy those nine additional years reduces the risk that the Exchequer will have to back in later years the total cost of everyone to sustain themselves. That point does not seem to be acknowledged. Which is better: to give people the chance to buy extra years so that they are less likely to depend on public support or to say, “Sorry, we can’t help you; you’ve missed out and it’s your fault”? Seven or eight years later, who will be carrying the can? A persuasive case can be made for this amendment.

Baroness Greengross: My Lords, the noble Lord, Lord Dearing, has been extremely eloquent and I want to add only a few words in support of the amendment moved by the noble Baroness, Lady Hollis. It is impossible to predict the circumstances in later life of people who now have or have had young families but have not made adequate contributions and want to be able to catch up. This applies almost exclusively to women, but not always. More and more men in middle age and later are finding that their own circumstances change dramatically. We know that many more men decide to leave their wives at the point at which the children are almost grown up. A lot of children now stay at home for much longer than they used to for all sorts of reasons that we do not need to go into now. They stay at home and they are a responsibility. Increasing drug and alcohol abuse makes the dependency of children as well as elderly people much more frequently a problem in families. Many women and some men now find that they have responsibilities they did not expect to have. We must help them. The noble Lord, Lord Dearing, made an impassioned plea; I support him and the noble Baronesses, Lady Hollis and Lady O’Cathain. We must do this for justice as well as for cost-effectiveness.

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Baroness Shephard of Northwold: My Lords, I, too, support the amendment. I pay tribute to the noble Baroness, Lady Hollis, for her expertise and her tenacity in trying to correct a real anomaly in pensions provision, which she has, with her usual clarity, exposed to the House. She emphasised the number of women who are affected by this anomaly; we do not know the full number, but it is substantial.

I should like briefly to point up the particular problems in rural areas. In rural west Norfolk, 12 per cent of retired women are likely to have the full pension provision compared with 92 per cent of men. Twenty-three per cent of retired women in Birmingham will qualify for a full pension provision compared with, again, only 12 per cent in rural west Norfolk. Thirty per cent of such women will qualify in Cambridge; 20 miles away in rural west Norfolk, only 12 per cent will.

Why is this? As the noble Baroness has explained in the past, it is mostly to do with rural employment patterns. A woman may well have to take a number of low-paid jobs. She might have three jobs: she might be doing vegetables in the morning, cleaning in the afternoon and, more than likely, working for a private

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caterer in the evening. None of those jobs pays her enough to qualify her for this pension provision. It is extraordinary. The noble Baroness has provided us with an opportunity to correct the anomaly in an entirely sensible way which may find favour with the Minister. We cannot speak, of course, for the Treasury.

Another issue affecting rural areas is that many older women have to give up work altogether, either to look after grandchildren or to look after elderly parents. I make this point especially for rural women because the access to childcare or to day care for elderly relatives is limited by transport. If you do not have two cars in your family, you can forget it; you do the caring. So women are doubly or trebly disadvantaged if they live in rural areas. That is why the amendment should be supported.

Baroness Thomas of Winchester: My Lords, as the noble Baroness, Lady Hollis, has said, if we are going to keep the contributory principle, the amendment would meet several needs. First, it addresses the steep cliff face that will be reached in spring 2010, when woman number one could retire needing 39 years’ worth of contributions for a full state pension but the day after woman number two would need only 30 years’ worth of contributions. Under the amendment, anticipating this change before retirement, woman number one could buy nine years of class 3 contributions. Would that really be so complicated? We are not talking, after all, about tapers or backdating, which might be both more complex and expensive than what is suggested in the amendment.

The Minister may say that the amendment would encourage some people to invest money that they would have spent in paying contributions on the nail, knowing that they could buy contributions at a later date. However, I do not think that that is a likely scenario given the kind of people whom this amendment is designed to help. The most obvious of those are those groups of women whom we have heard about today who do not have a full contribution record for the basic state pension. The Minister will almost certainly say that bringing down the number of years from 39 to 30 is quite enough help for that group because nearly every woman, whatever her circumstances, is likely to have some periods of settled employment. However, that is not the calculation of those who have studied people’s work patterns, who reckon that over 1 million people, most of them women, will not have a full basic state pension in 20 years.

When the noble Baroness, Lady Hollis, moved the amendment in Committee, she made a powerful case, part of which was that, because of the failure of a government computer, people were indeed able to buy more than the six years allowed now to make up for the deficiencies in the contributions that the computer had failed to tell them about in time. If it was not too complicated then, why is it too complicated today?

Today, more than ever, people live for the moment. They have a portfolio of jobs, with often not much thought for their pensions. But, as they reach retirement, these people may inherit some money, which they would like to use to plug several gaps in

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their contributions record for earlier years in order to receive a full basic state pension. What more prudent course could they take? However, unless the principle behind the amendment is accepted, they will not be allowed to.

Obviously the amendment is not cost free, but, as the noble Lord, Lord Dearing, said, if it prevents the need for so much means-testing for retired people in the future, that surely must be factored into any calculations of cost. I simply ask the Minister to consider the problem again. After all, he has said already that to make such a change does not need primary legislation; it can be put through as delegated legislation under the Social Security Contributions and Benefits Act 1992. The Bill gives us a golden opportunity to put fairness into the system by accepting the amendment, which we strongly support.

Baroness Lockwood: My Lords, I hope that my noble friend the Minister will be able to accept the amendment tabled by my noble friend Lady Hollis. In effect, it deals with the historical problem of women not being encouraged to pay their own contributions or to think in terms of earning a pension in their own right. Policies have changed, and the Government’s policy is to encourage people to save and invest as much as they can during their working lives in order to have an adequate pension when they retire. However, they do not necessarily retire at the minimum state retirement age. We are now encouraged to continue beyond the minimum retirement age, and we are moving up to a period when men and women will have an equal retirement age.

This discrimination will not be so great in the future. I hope, therefore, that the Minister will see that the principles behind the amendment meet the Government’s objectives and that he will be prepared on those grounds, and on the grounds of fairness and social justice, to accept the amendment.

Baroness Howe of Idlicote: My Lords, it is important that as many noble Lords as possible speak in favour of the amendment in order to ensure that the Minister is in no doubt whatever about the strength of feeling in the House. We are extremely lucky to have the Bill before us. It has at last recognised the important role that carers have played for quite a long time in our economy—that is a major feature—but inevitably parts of it need updating a little.

We are even luckier to have with us the noble Baroness, Lady Hollis, who has been a Minister and has expertise in every aspect of this area. You can bet your bottom dollar that if she says this proposal will work, it will. If the noble Lord, Lord Dearing, is prepared to admit that he finds some of this quite difficult to follow, then I feel less shy about admitting that I find it even more difficult to do so. There are people who are much less versed in these matters—they may have fewer contacts and support, and cannot ask their consultants or accountants—and it is even more important that they have help. I so agree with the noble Baroness, Lady O’Cathain, about fairness—that, more than almost anything else, needs emphasising.



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I am very glad that the amendment has been backed by so many people, such as the first chairman of the Equal Opportunities Commission. The EOC is in favour of the amendment, along with Age Concern, Help the Aged and Carers UK. We have support everywhere, and now would be a wonderful moment for the Minister to acknowledge this and say that action will definitely be taken.

Lord Forsyth of Drumlean: My Lords, I support the amendment of the noble Baroness, Lady Hollis, who looks slightly surprised, for many of the reasons that have been put forward, which I shall not repeat, but particularly on the ground of fairness. I think that the proposal is actually unambitious—it is the right proposal at this moment to provide a remedy.

The idea that national insurance contributions are separate from other forms of taxation and that they go into a fund is a complete fiction. I spent about a year of my life chairing the Tax Reform Commission, and the relationship between tax and national insurance is almost incomprehensible. There are different periods over which national insurance applies and different starting rates. It all makes great difficulties for employers and the case for at least aligning the two systems is enormously strong.

I suspect that the Minister will point to cost. If he is worried about cost, he can find additional revenue by simplifying the system. It will shift the burden on to some people but they tend to be pretty well-to-do. The Minister is shaking his head, but if he looks at the way in which national insurance bites, it falls on people with lower incomes. People who earn very big sums of money are not making a proportional contribution. That is because the Treasury maintains this fiction that national insurance is different from tax, that somehow it is a charge for a particular benefit. We all know that that is a fiction. Successive Governments have avoided confronting this fiction because if they provide the remedy, it looks as if they are putting up the burden of taxation.

The Minister should be brave and accept the amendment. He should persuade the new Chancellor and the Prime Minister that there is an opportunity here to simplify the tax system and make it fairer and that, far from being revenue-neutral, it is possible to do what the noble Baroness suggests and increase the revenue available to the Exchequer. This is a legislative opportunity, and I hope that it will be taken.

Lord Howarth of Newport: My Lords, my noble friend has drawn attention to a palpable deficiency and a notorious injustice in the present arrangements, whereby the contributory system fails to recognise the myriad contributions to our society made by women who are not in regular or well-paid employment. My noble friend has put forward an imaginative and practical solution to this pressing problem.

Of course it is right that the Treasury looks sceptically and searchingly at all new proposals of public policy to see what the costs may be. The Government have had plenty of time to examine the cost implications of my noble friend’s proposals, so I hope that my noble friend the Minister will be able to tell the House what

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assessment the Treasury has made of the cost of this, netting off against the cost the savings on benefit contributions that might otherwise occur, to which the noble Lord, Lord Dearing, drew attention.

I cannot believe that any costs that the Treasury has been able to accumulate against this proposal would bear any comparison with the costs of open-ended and indiscriminate tax relief at 40 per cent on private pension contributions, which the Government are more than happy to allow. The proposal is affordable; it is decent; and it is the proper thing for the Government to do.

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Baroness Miller of Hendon: My Lords, I shall be brief, because every point of the amendment, with all its faults and deficiencies, has been covered. The present position is anomalous, discriminatory and, most of all, unfair. If the noble Baroness decides to test the opinion of the House, I shall for the first time vote in a way that my noble friends on the Front Bench probably will not. I believe that they will abstain—I have not discussed it with them, but that is what I think they will do.

The noble Baroness is not only tenacious, as my noble friend Lady Shephard said, but also enormously courageous. She had the courage to plough on at the very beginning—it went on for two minutes—when noble Lords were walking out, talking and not hearing anything. The problem is that, if we divide on the amendment, a lot of noble Lords will not have heard all the arguments. Before we take advantage of voting in the way we ought, we might gently mention to our noble friends the opinions of the whole House. It is time that we dealt with all the anomalies by supporting the noble Baroness.

Lord Turner of Ecchinswell: My Lords, I support the amendment. We on the Pensions Commission had two concerns about the state pension system as against the private pension system. The first was to make sure that as many people as possible ended up with full basic state pensions in order to minimise the impact of means-testing, which would be a disincentive to the improvements in private savings that we have to achieve. We were also very aware that we needed to increase dramatically the fairness of the state pension system to women.

The Pensions Commission debated two different ways to proceed. One was to suggest that the Government should head towards a residence-based form of basic state pension, or a citizen’s pension as some people call it, where everybody would receive a basic state pension simply by having been resident in the country for a certain number of years. That would have the advantage of being the only way to ensure that everybody—in particular, all women—had a full basic state pension. It is of course more expensive than improving the contributory system. The other way to proceed would be to improve the effectiveness of the contributory system by making it easier for women in particular to accrue years of rights through carer responsibilities rather than through paid work.



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The Pensions Commission came down in principle in favour of a residence-based approach, though we always understood the arguments of those who were in favour of improvements in the contributory system. We found in focus groups that many people are attracted to the contributory system; they feel that people ought to receive something for a contribution. That principle has a merit even separate from the points made by the noble Lord, Lord Forsyth, about the arbitrary differences between national insurance and tax.

Therefore, when the Government came forward with their proposals, which were an improvement to the contributory system but slightly different from what we had proposed, I could strongly support them. The way forward they chose—that is, a reduction in the qualifying years to 30—was an imaginative way of making sure that the vast majority of people would achieve a full basic state pension looking forward.

However, that still leaves two clear problems. First, a small, but still important, minority of women, often on low incomes, will not achieve a full basic state pension and will therefore be dependent on means-tested benefits in retirement. That is true even looking forward. We are getting the full basic state pension forecast for women for up to something like 90 per cent, but we are still short of the 97 per cent or 98 per cent, at which point you could be confident that the only people who were not getting it were, as it were, rich people who had chosen not to work. That is the flipside the contributory system; you would always accept a few percentage points, but as long as it stands at 90 per cent, we know that some of the 10 per cent who are not there will not be people who have chosen not to work but people who have simply failed through their life—through having earnings lower than the lower earnings limits or falling through the rules on carer responsibilities—to get the accrual of rights that they ought.

That is one problem. The other problem is the one of the cliff edge. The way in which the Government propose to proceed is that, looking forward from 2010, people will receive basic state pensions on a 30-year rule thereafter, but it will not affect those people who retire before then. This is an imaginative way of trying somewhat to mitigate the problem of the cliff edge and trying significantly to deal with the remaining minority of women who will not get to the full basic state pension, looking forward.

To my mind, therefore, this measure is the final thing required to produce a contributory system that would work, rather than a residency-based system. I urge it on the Government as the final step that they must make to be able to say that we do not have to move towards a residency-based system but that we have a fully updated and effective version of the contributory system.

Lord Fowler: My Lords, we have just heard a very significant speech, because the noble Lord has spent a great deal of time considering the pensions system in this country. He carried out a review of pensions and social security, as did I 20 years previously, and we have both come to the same conclusion about this amendment. I support the amendment in exactly the same way as the noble Lord supports it.



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I congratulate the noble Baroness, Lady Hollis, on persisting in putting this proposal forward. I cannot remember who said that he hoped the Minister would listen to the debate, but I think that the Minister would have to be deaf if he had not heard what has so far been an entirely unanimous argument in favour of the amendment. Dare I say that, I hope those on my own Front Bench are also listening to the argument in the same way?

I give three reasons for supporting this amendment. First, there is the argument that the noble Lord, Lord Turner, has just put—the argument of the cliff edge. The Government are reducing to 30 years the contributory years for a pension but, at the moment, there is a severe cliff edge. A woman who retires in February 2010 still needs 39 years’ contributions; if she retires in May 2010, she needs only 30 years. By allowing the first woman to buy back the nine years, that problem would be substantially overcome.

Secondly, I give the reason also given by the noble Baroness on the Liberal Democrat Benches—that it is perfectly possible to do it. This Government have done it in allowing people to buy back not just nine but 12 years. That was because of a mistake in their computers, but if it can be done for 12 it can self-evidently be done for nine.

Thirdly, the amendment would strengthen the contributory principle. As long as there is no other system—and there is no other system—surely that is what we want to do. We do not have an insurance system in this country; we have a pay-as-you-go system, which means that the contributions of today pay for the benefits of today. The people making those contributions rely on the assurance of the Government that in their turn they will be helped.

There is nothing revolutionary or new in the idea of buying back. I dare say that quite a number of Members of this House have done exactly that—I certainly have, as a Member of Parliament. I know that people in the Civil Service have, too. As for cost, surely there is the offset of means-tested benefits that we will avoid by going down this road. I hope that that will be taken into account.

I shall be perfectly frank—I do not trust the Treasury on pensions. All my past experience tells me that Treasury staff are the worst possible people under the sun to have charge of the nation’s pensions. I think that the noble Lord, Lord Barnett, was nodding; at least, he was smiling. He has more experience of that than most. Above all, this measure would quintessentially help women who have had their careers interrupted by the demands of family. Indeed, the latest figures show that of the 250,000 people who bought back years in 2004, almost 150,000 were women. The figures speak for themselves. Therefore, I see this as a measure of equality and common sense. I hope that the House will support it.

Lord Turnbull: My Lords, having worked in the Treasury for more than 30 years, four years as Permanent Secretary, I shall now try to make amends. We should imagine Britain partitioned, not north-south, as it is now, but east-west. The east is run by the Revenue and Customs Party, which believes that when you have accumulated a certain amount of wealth, it should be

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turned into an annuity to provide a better pension. The west is run by the Department for Work and Pensions, which has a different philosophy. As women there approach retirement or pension age, the department sends them a deficiency notice telling them how many years they are short of being able to get a full pension and explaining that they can buy back up to six of them. So in the east we have compulsory annuitisation while in the west we have compulsory limitation of annuitisation. Does this make any sense? The answer is, no it does not.


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